EU Market Update: European inflation data remains soft; German net unemployment improves for the first time in 7 months
Notes/Observations
- FOMC ends bond buying and take a less dovish tone; likelihood of inflation running persistently below 2% had diminished somewhat since early this year.
- New Zealand Central Bank (RBNZ) left its Official Cash Rate unchanged at 3.50% (Second straight pause in the current tightening cycle; sends dovish message on rate outlook
- Brazil Central Bank (BCB) surprises and hikes Selic Target Rate by 25bps to 11.25% to ensure inflation falls to target
- Germany Oct Net Unemployment Change registers its first improvement in 7 months (-22K v +4Ke)
- Spain Q3 GDP registers its 5th straight quarterly growth
- Spanish and German MoM CPI readings come in below expectations
Key Economic Data in session
- (UK) Oct Nationwide House Prices M/M: 0.5% v 0.3%e; Y/Y: 9.0% v 8.5%e
- (CH) Swiss Sept UBS Consumption Indicator: 1.41 v 1.28 prior
- (ES) Spain Q3 Preliminary GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.6% v 1.6%e
- (ES) Spain Oct Preliminary CPI Y/Y: -0.1% v 0.0%e; CPI EU Harmonized Y/Y: -0.2% v -0.2%e
- (AT) Austria Q3 GDP Q/Q: 0.0% v 0.1% prior; Y/Y: 0.2% v 0.6% prior
- (CH) Swiss Oct KOF Leading Indicator: 99.8 v 99.2e
- (DE) Germany Oct Unemployment Change: -22K v +4Ke (first decline in 7 months); Unemployment Rate: 6.7% v 6.7%e
- (DE) Germany Oct CPI Saxony M/M: -0.2% v +0.1% prior; Y/Y: 1.0% v 0.9% prior
- (DE) Germany Oct CPI Brandenburg M/M: -0.3% v 0.0% prior; Y/Y: 0.9%v 0.9% prior
- (DE) Germany Oct CPI Hesse M/M: -0.2% v 0.1% prior; Y/Y: 0.8% v 0.8% prior
- (DE) Germany Oct CPI Bavaria M/M: -0.3% v 0.1% prior; Y/Y: 0.8% v 0.8% prior
- (DE) Germany Oct CPI North Rhine Westphalia M/M: -0.2% v 0.0% prior; Y/Y: 1.0% v 1.1% prior
- (ZA) South Africa Q3 Unemployment Rate: 25.4% v 25.6%e
Fixed Income:
- None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
**Equities**
Indices [Stoxx50 -0.5%, FTSE 100 -0.6% at 6,413, DAX -0.5% at 9,032, CAC-40 -0.2% at 4,100, IBEX-35 -1.3% at 10,107, FTSE MIB -1% at 18,944, SMI +0.1% at 8,664, S&P 500 Futures -0.1% at 1,969]
- Market Focal Points/Key Themes: Equity markets open higher amid better earnings from Bayer and Volkswagen as dealers assess recent Fed statement, Markets later pare gains led by periphery, IBEX-35 declines amid weak inflation data, Greek banks underperform amid political concerns, Upcoming US Q3 GDP data and German CPI, US morning earnings (Cigna, Bunge, ConocoPhillips, Avon, Kellogg, Mastercard, MGM)
- Earnings Recap (Bayer raises outlook, Volkswagen beats ests, Renault sales beat ests, Eni beats ests, Shell beats ests, Clariant raises sales forecast, Technip sales above ests, Alcatel-Lucent sharply narrows Q3 loss, BT sales below ests, Wacker Chemie beats ests, Linde cuts outlook, Lufthansa cuts 2015 outlook, Novo Nordisk mixed, Barclays Q3 profits rise, Banco Sabadell beats ests, Danske Bank beats ests)
By Sector
- Industrials [Draegerwerk DRW3.DE +8% (Q3 results above ests), Renault RNO.FR +3.5% (Q3 sales above ests), Technip TEC.FR +3.5% (Q3 sales above ests), Volkswagen VOW3.DE +3% (Q3 results above ests, reaffirmed outlook); Linde LIN.DE -6% (profit warning)]
- Basic Materials/Resources [Wacker Chemie WCH.DE +4% (Q3 results above ests), Clariant CLN.CH +2% (raised FY sales forecast)]
- Consumer Discretionary [Tesco TSCO.UK -1% (ex-dividend), Lufthansa LHA.DE -0.5% (cut FY15 outlook)]
- Healthcare [Bayer BAYN.DE +3% (Q3 above ests, raised outlook), Novo Nordisk NOVOB.DK +1% (Q3 profits above ests)]
- Energy [Eni ENI.IT +1.5% (Q3 profits above ests), Shell RDSA.UK flat (Q3 profits above ests)]
- Telecom [Alcatel-Lucent ALU.FR +10% (Q3 loss narrowed); BT BT.UK -0.9% (Q2 sales below ests)]
- Financials [Banco Sabadell SAB.ES +3% (Q3 profits above ests), Danske Bank DANSKE.DK +2% (Q3 profits above ests), Barclays BARC.UK +1.5% (Q3 profits above ests)]
- Utilities [Abertis ABE.ES +2% (9-month profit above ests)]
- Stoxx50 sectors [Consumer Cyclical +1%, Technology +0.9%, Consumer Non-Cyclical +0.9%, Energy +0.8%, Telecom +0.4%, Industrials +0.4%, Financials +0.3%, Utilities +0.2%; Basic Materials -0.7%]
Speakers
- BOE's Cunliffe commented that the domestic economy was growing strongly with little inflation pressures at this time . First BOE rate hike must be a careful judgment and it wanted to support recovery for as long as possible. He reiterated MPC view that rates hikes would be limited and gradual when they do come
- Russia Energy Ministry: Expect to resume gas talks with Ukraine today
- EU's Barroso: Ukraine/Russia gas agreement within reach
Currencies/Fixed Income:
- USD strength emerged after the FED statement reaffirmed it was moving toward a tighter monetary policy more quickly than its peers. FOMC ended its 2-year bond buying program (QE3) and took on a less dovish tone. It now saw the likelihood of inflation running persistently below 2% diminishing compared to its view from early 2014 and acknowledged the improvement in the labor market.
- USD/JPY held above the 109 handle throughout the session for 3-week highs and EUR/USD was at 3-week lows below 1.2570 area
- The NZD/USD was lower after RBNZ Gov Wheeler post rate decision statement removed the phrase "we expect some further policy tightening will be necessary"
- Spot gold was at 3-week lows and was within striking distance of the pivotal $1,180 area. The level corresponds with the Jun 24th 2013 low of $1,179.83. Dealers noted that a potential measured move of the 12-month consolidation pattern suggested that $1,000 could be tested should the support level give away
Political/In the Papers:
- (BR) Brazil govt could announce fiscal measures to cut spending and increase revenues during first week of Nov
Looking Ahead
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (BR) Brazil Sept Central Govt Budget Balance (BRL): -11.0Be v -10.4B prior
- (BR) Brazil Oct CNI Consumer Confidence: No est v 109.7 prior
- (DE) Germany Oct CPI Baden Wuerttemberg M/M: No est v 0.0% prior; Y/Y: No est v 0.8% prior
- (BE) Belgium Oct CPI M/M: No est v -0.1% prior; Y/Y: No est v -0.1% prior
- (DK) Denmark to sell Bills
- 06:00 (BR) Brazil Oct FGV Inflation M/M: 0.2%e v 0.2% prior; Y/Y: 2.9%e v 3.5% prior
- 06:00 (EU) Euro Zone Oct Business Climate Indicator: 0.05e v 0.07 prior; Consumer Confidence: -11.1e v -11.1 prelim; Economic Confidence: 99.7e v 99.9 prior; Industrial Confidence: -5.5e v -5.5 prior; Services Confidence: 3.1e v 3.2 prior
- 06:00 (EU) Daily Euribor Fixing
- 06:00 (IT) Italy Debt Agency (Tesoro) to sell combined €4.00-5.25B in 5-year and 10-year Bonds
- (IT) Italy Debt Agency (Tesoro) to sell €1.5-2.0B of Dec 2020 CCTeu Floating Rate Bonds
- 06:00 (HU) Hungary Debt Agency (AKK) to sell Bonds
- 07:00 (IL) Israel Sept Unemployment Rate: No est v 6.4% prior
- 07:00 (RU) Russia Gold and Forex Reserve w/e Oct 24th: No est v $443.8B prior
- 07:00 (PT) Portugal Sept Industrial Production M/M: No est v 1.0% prior; Y/Y: No est v 3.5% prior
- 07:00 (PT) Portugal Sept Retail Sales M/M: No est v 2.3% prior; Y/Y: No est v 1.3% prior
- 07:00 (CZ) Czech Republic to sell CZK8.0B in 12-Bills
- 07:30 (NO) Norway Central Bank (Norges) Vikoeren speaks in Oslo
- 07:45 (US) Daily Libor Fixing
- 08:00 (CL) Chile Sept Unemployment Rate: 6.7%e v 6.7% prior
- 08:00 (ZA) South Africa Sept Budget Balance (ZAR): No est v -7.3B prior
- 08:30 (US) Q3 Advance GDP Annualized Q/Q: 3.0%e v 4.6% prior; Personal Consumption: 1.9%e v 2.5% prior
- 08:30 (US) Q3 Advance GDP Price Index: 1.4%e v 2.1% prior; Core PCE Q/Q: 1.4%e v 2.0% prior
- 08:30 (US) Initial Jobless Claims: 285Ke v 281K prior; Continuing Claims: 2.35Me v 2.351M prior
- 08:30 (US) Weekly USDA Net Export Sales
- 08:30 (BR) Brazil Sept Total Outstanding Loans (BRL): No est v 2.864T prior; M/M: No est v 1.0% prior; Private Banks Lending: No est v 1.346T prior; Personal Loan Default Rate: No est v 6.6% prior;
- 09:00 (DE) Germany Oct Preliminary CPI M/M: -0.1%e v 0.0% prior; Y/Y: 0.9%e v 0.8% prior
- 09:00 (DE) Germany Oct Preliminary CPI Harmonized M/M: -0.1%e v 0.0% prior; Y/Y: 0.9%e v 0.8% prior
- 09:00 (US) Fed Chair Yellen speaks on diversity in Washington DC
- 09:15 (US) Baltic Dry Bulk Index
- 10:15 (BR) Brazil to sell 2015, 2016, 2018 Bills
- 10:15 (BR) Brazil to Sell Fixed-rate 2021 and 2025 bonds
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (FI) ECB's Liikanen (Finland) in Berlin
- 13:00 (US) Treasury to sell $29B in 7-Year Notes
- 14:00 (ES) Bank of Spain (BOS) de Molina speaks in Cadiz
- 14:15 (ES) ECB's Linde (Spain) speaks in Madrid
- 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 4.50%
- 19:30 (JP) Japan Sept Jobless Rate: 3.6%e v 3.5% prior
- 19:30 (JP) Japan Sept National CPI Y/Y: 3.3%e v 3.3% prior; CPI Ex Fresh Food Y/Y: 3.0%e v 3.1% prior; CPI Ex Food, Energy Y/Y: 2.2%e v 2.3% prior
- 19:30 (JP) Japan Oct Tokyo CPI Y/Y: 2.7%e v 2.9% prior; CPI Ex Fresh Food Y/Y: 2.5%e v 2.6% prior; CPI Ex Food, Energy Y/Y: 2.0%e v 2.0% prior
- 20:05 (UK) Oct GfK Consumer Confidence: -1e v -1 prior
- (UK) South Yorkshire Police Commissioner By-Election
- (JP) Bank of Japan (BOJ) Rate Decision on Friday
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